10-QPeriod: Q1 FY2007

NEWMONT Corp /DE/ Quarterly Report for Q1 Ended Mar 31, 2007

Filed April 27, 2007For Securities:NEMNEMCL

Summary

Newmont Mining Corporation's first quarter 2007 report shows a significant decrease in net income and earnings per share compared to the same period in 2006. This decline is attributed to lower gold ounces sold and increased operating costs, which were not fully offset by higher realized gold and copper prices. The company also saw an increase in depreciation, depletion, and amortization expenses, largely due to new operational start-ups and fleet expansion. Despite the reduced profitability, Newmont continues to invest in its future with substantial capital expenditures, particularly in its Nevada and Australia/New Zealand operations, including progress on the Boddington project and a new power plant in Nevada. The company also secured a larger revolving credit facility, enhancing its financial flexibility. Management notes ongoing challenges at specific operations, such as the Phoenix mine in Nevada, which are impacting costs and production levels.

Key Highlights

  • 1Net income for Q1 2007 was $68 million ($0.15 per share), a substantial decrease from $209 million ($0.47 per share) in Q1 2006.
  • 2Consolidated gold ounces sold decreased by 11% to 1.6 million ounces, primarily due to lower production at Yanacocha and increased operating costs across various segments.
  • 3Consolidated copper pounds sold increased by 12% to 91 million pounds, driven by higher mill throughput at Batu Hijau.
  • 4Costs applicable to sales per gold ounce sold increased significantly by 53% to $421, impacted by lower production, higher waste removal, and unfavorable currency movements.
  • 5Depreciation, depletion, and amortization (DD&A) increased by $52 million to $192 million, reflecting new operations and fleet expansion.
  • 6Capital expenditures totaled $362 million, with significant investments in Nevada (power plant construction) and Australia/New Zealand (Boddington project).
  • 7The company renegotiated its revolving credit facility, increasing its amount to $2 billion and extending its maturity to April 2012.

Frequently Asked Questions

The significant drop in net income was primarily due to a decrease in consolidated gold ounces sold (down 11%) and a substantial increase in costs applicable to sales per gold ounce (up 53%). While higher realized gold and copper prices offered some offset, they were not enough to overcome the lower volumes and higher operating expenses. Additionally, increased depreciation, depletion, and amortization also impacted profitability.

Newmont's capital expenditures in the first quarter of 2007 were concentrated in several key projects. Notably, $158 million was spent in Nevada, primarily for the construction of a new power plant and mine equipment replacement. In Australia/New Zealand, $98 million was invested, largely for the ongoing development of the Boddington project. Significant investments were also made in Batu Hijau for sustaining mine development and in Ahafo, Ghana, for power shortage mitigation and sustaining development.

Yes, the company highlighted challenges at the Phoenix mine in Nevada, including lower-than-expected ore grade, difficult ore characteristics, and mill availability issues. These challenges are impacting the mine's cost and production outlook. Additionally, power availability issues in Ghana are being addressed, and ongoing operational difficulties at Phoenix could lead to costs per ounce exceeding initial expectations for the year.

Newmont's liquidity was strengthened by renegotiating its revolving credit facility to $2 billion, extending the maturity date to April 2012, which provides greater financial flexibility. Net cash provided from continuing operations decreased significantly compared to the prior year, impacted by lower sales volumes and higher costs. However, the company has access to cash balances, short-term investments, and the enhanced credit facility to meet its financial obligations and fund future capital expenditures.